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Accy 110 – Auditing Problems

AUDIT OF CASH

Problem 1. You have been asked by the proprietor of the Sudan Co to verify then accountability of the
cashier-bookkeeper, who have taken a vacation leave a few days ago.
A. The bank reconciliation statements prepared by the cashier-bookkeeper are presented below:

November 30, 2018 December 31, 2018


Balance per bank P 21,500 Balance per bank P135,000
statement statement
Cash on hand 500 Cash on hand 6,300
Total 22,000 Total 141,300
Outstanding checks Outstanding checks
No. 2520 P 2,000 No. 2674 P 31,000
2521 1,400 2575 10,300
2522 1,900 (3,300) 2576 5,000 (41,300)
Erroneous bank charge 2,000 Erroneous bank charge 3,000
Erroneous bank credit (500) Erroneous bank credit (600)
Book Balance P 20,200 Book Balance P102,400

B. The cash in bank account in the general ledger shows the following debits and credits during
December:
Cash in Bank
Dec. Dec.
1 Balance P 20,200 1 Checks issued P 2,000
2 Received from customers 4,500 5 Checks issued 5,200
7 Received from customers 5,000 14 Checks issued 31,000
12 Received from customers 20,000 24 Checks issued 46,000
17 Received from customers 30,000 28 Checks issued 7,600
23 Received from customers 9,000
27 Received from customers 70,000
31 Received from customers 48,500 31 Balance 102,400
Total P 198,200 Total P 198,200

C. The following summarized transactions were taken from the bank statement for the month of December
2018.

Balance, December 1, 2018 P 16,500


Total deposits 173,700
The total deposits per bank statement include:
a. Collection of notes receivable 5,000
b. Correction of November erroneous bank charge 2,000
c. December 10 deposit of Lava, Inc credited in error to Sudan 600
Total P7,600
Total Checks 65,200
The total checks per bank statement include:
a. Correction of November erroneous bank credit P 500
b. December check of Nile Co. charged in error to Sudan 3,000
Total P3,500

D. Cash on hand per count in the morning of January 2, 2019, amounted to P6,300
E. Before leaving his company for a one-week vacation, the proprietor had left several signed blank
checks that the cashier-bookkeeper had cashed for his personal use.

1. What is the cash shortage as of November 30, 2018?


a. P5,000 b. P7,000 c. P33,000 d. P13,200

2. What is the adjusted cash balance on November 30, 2018?


a. P16,500 b. P13,200 c. P20,200 d. P14,500

3. The amount of unaccounted receipts in December is


a. P11,000 b. P13,200 c. P9,000 d. P15,100

4. The amount of unrecorded/unsupported disbursements in December is


a. P15,100 b. P10,900 c. P7,000 d. P5,000

5. What is the total cash shortage as of December 31, 2018?


a. P26,000 b. P15,100 c. P33,000 d. P7,000

6. What is the adjusted cash balance on December 31, 2018?


a. P104,200 b. P125,000 c. P87,400 d. P111,400

Problem 2. Toy Story Company has a current account in Infinity and Beyond Bank. Your audit of the
company’s cash account reveals the following:
A. Balances taken from the company’s general ledger:
Cash balance, November 30, 2018 P637,860
Cash balance, December 31, 2018 576,420
Receipts, December 1 – 31, 2018 306,220
B. Outstanding checks, November 30, 2018
(26,140 was paid by bank in December 64,140
C. Checks written and recorded in December; not included in the checks returned with the
December bank statement 36,080
D. Deposit in transit, November 30, 2018 15,260
E. Deposit in transit, December 31, 2018 16,140
F. A bank credit memo was issued in December to correct an erroneous charge made in
November 1,500
G. Note collected by bank in December (company was not informed of the collection) 2,060
H. A check for P2,020 (payable to a supplier) was recorded in the check register in
December as P3,000 980
I. A check for P2,240 was charged by the bank as P2,420 in December 180
J. Toy Story Co. issued a stop payment order to the bank in December. This pertains to a
check written in December which was not received by the payee. A new check was
written and recorded in the check register in December. The old check was written off by
a journal entry, also in December 780
K. Bank service charge, November 30, 2018 60

7. The total outstanding checks on December 31, 2018 should be


a. P38,000 b. P74,080 c. P36,080 d. P62,220

8. What is the bank statement balance on November 30, 2018?


a. P684,400 b. P587,420 c. P685,180 d. P688,180

9. What is the bank statement balance on December 31, 2018?


a. P636,440 b. P637,220 c. P637,580 d. P637,160

10. The total bank disbursements for the month of December is


a. P356,080 b. P356,860 c. P357,640 d. P356,200

Problem 3. Viand Company uses the direct method to prepare its statement of cash flows. Viand’s trial
balances at December 31, 2018 and 2017 are shown below:
December 31
Debits 2018 2017
Cash P 105,000 P 96,000
Accounts receivable 99,000 90,000
Inventory 93,000 141,000
Property, plant and equipment 300,000 285,000
Unamortized bond discount 13,500 15,000
Cost of goods sold 750,000 1,140,000
Selling expenses 424,500 516,000
General and administrative expenses 411,000 453,900
Interest expense 12,900 7,800
Income tax expense 61,200 183,600
Total P 2,270,100 P 2,928,300
Credits
Allowance for bad debts P 3,900 P 3,300
Accumulated depreciation 49,500 45,000
Accounts payable – trade 75,000 46,500
Income taxes payable 63,000 87,300
Deferred income taxes payable 15,900 13,800
8% Bonds payable 135,000 60,000
Ordinary share capital 150,000 120,000
Share premium 27,300 22,500
Retained earnings 134,100 193,800
Sales 1,616,400 2,336,100
P 2,270,100 P 2,928,300
Additional data are as follows:
1. Viand company purchased P15,000 in equipment during 2018.
2. One-third of Viand’s depreciation expense is allocated to selling expenses and remainder to general
and administrative expenses.
3. Bad debt expense for 2018 was P15,000. During the year, uncollectible accounts totaling P14,400 were
written off. The company reports bad debts as selling expense.
Compute the following:
11. Cash collected from customers
a. P1,593,000 b. P1,578,000 c. P1,607,000 d. P1,639,800

12. Cash paid to suppliers


a. P769,500 b. P826,500 c. P673,500 d. P730,500

13. Cash paid for interest


a. P14,900 b. P22,200 c. P600 d. P11,400

14. Cash paid for income taxes


a. P39,000 b. P83,400 c. P87,400 d. P34,800

15. Cash paid for selling expenses


a. P408,000 b. P423,000 c. P405,000 d. P409,500

Problem 4. Fe Company, organized on March 1, 2018 has a very poor internal control system. The company’s
cashier is also its accountant. After 9 months of operations, the company’s manager suspects that the cashier
accountant has been misappropriating company collections. You have been engaged to audit the company’s
account to determine the extent of fraud, if any.
You started the audit on November 15. On that date, the cash on hand per your surprise count was
P5,140. Also, on that date, the bank confirmed that the balance of the company’s current account was P26,328.
Your examination of the records reveals that a check for P1,852 was outstanding on November 15. The
company’s mark-up is 40% of sales.
Further examination of the company’s records reveals the following balances at November 15, 2018:
Ordinary share capital P 300,000
Share premium 20,000
Real property purchased for cash 200,000
Mortgage Payable 80,000
Furniture & Fixtures (of the acquisition cost, P6,000 remains unpaid as of Nov. 15) 29,000
Notes payable-bank 32,000
Accounts payable – trade 46,284
Expenses paid (excluding purchases) 60,756
Merchandise inventory at cost 93,920
Accounts receivable – trade 85,380
Total sales 340,000
16. How much was paid for inventory purchases?
a. P157,716 b. P293,716 c. P183,636 d. P251,636

17. How much was collected from customers?


a. P118,620 b. P254,620 c. P50,620 d. P340,000

18. How much is the cashier’s accountability at November 15, 2018?


a. P131,228 b. P83,228 c. P145,228 d. P151,228

19. What is the adjusted bank balance as of November 15, 2018?


a. P31,468 b. P26,328 c. P29,616 d. P23,040

20. The cash shortage as of November 15, 2018 totaled


a. P121,612 b. P101,612 c. P125,612 d. P206,992

END